Mar 24, 2005

Somaliland: Stability amid economic woe

As Tony Blair's Commission for Africa published its report on stimulating development in March 2005, the BBC's Rob Walker visited Somaliland to see how it is faring
Untitled Document Ahmed Hassan is sitting behind a large stack of Somaliland shillings on one of the dusty streets of the market place in the capital Hargeisa.

He and other money changers are doing a brisk trade, converting between shillings, dollars and euros.

"We watch TV every morning to check the strength of the dollar," he says, as a wheelbarrow arrives, piled high with Somaliland shillings.

Somaliland has its own currency, along with its own national anthem and flag. It even issues its own passports.

But Somaliland is a country in limbo, a state in waiting which no other country recognises.

'Unhappy marriage'

Former British Somaliland became independent in 1960 and joined Italian Somalia to the south a few days later to form the Somali Republic. But it was an unhappy marriage and in the 1980s, a rebel movement formed in the north to fight against the increasingly oppressive rule of Siad Barre.

After Barre's fall in 1991, clan elders in the former British protectorate met and agreed to unilaterally declare independence from the rest of Somalia.

Traditional clan-based negotiations have brought a remarkable degree of stability - a sharp contrast to the continuing violence in some other parts of Somalia.

Peace has allowed refugees to return and businesses to re-establish. In Hargeisa's market, Ahmed Hassan and other money-changers keep only a casual eye on the mounds of Somaliland currency.

"You see a lot of money here, but do you see any police, any guns? We have peace here," he said.

Fragile economy

Elsewhere in the capital, multi-storey buildings are springing up and newly-opened car dealerships compete to give the best prices for imported second-hand jeeps and pick-ups. We Somalilanders have built this country from the ruins, no-one has helped us," Somaliland's President, Dahir Riyale Kahin, told the BBC.

But the economy is still extremely fragile and poverty among Somaliland's population of 3.5 million is high.

Outside Hargeisa, at one of the many water points that dot the arid plain along the border with Ethiopia, Abdi Abdullahi waters his cattle.

"We are getting poorer, every year there is less grass for our livestock, and they produce less milk," he said.

Budgetary woes

More than half of Somaliland's population are nomadic pastoralists. The livestock sector, though, traditionally the backbone of the economy, can no longer support the growing population. Increasing numbers of destitute herders have arrived on the edge of cities like Hargeisa, swelling the numbers of urban unemployed which the government acknowledges are now worryingly high.

A ban on importing livestock by Saudi Arabia, imposed in 1998 after claims Somali livestock was infected with disease, has had a crippling effect on both the rural and urban economies.

"Sixty per cent of our foreign currency was earned from the export of livestock to Saudi Arabia. Since the ban, the government has found it very difficult to make both ends of the budget meet," said Hussein Ali Duale, Somaliland's Minister of Finance.

Relying on remittances

Many families now survive on remittances from relatives who fled to Europe and North America during the civil war. The government estimates that the diaspora send back US $300m to Somaliland every year.

But remittances can provide only a short-term safety net.

"In the coming 15 to 20 years, most remittances will stop," said Mr Duale. He believes that the next generation among the diaspora will have looser ties to their homeland.

"A young boy of 18 will ask 'Why should I send money to Somaliland?"

This means the economy urgently needs to diversify. And that requires massive investment in sectors like infrastructure and education.

But Somaliland's unresolved international status means it cannot access funds, from either private or public sources, on the scale required. The obstacle is that some companies say they cannot take their assets to a country with no international recognition, even if the country is peaceful," said Mr Duale.

And although Somaliland does currently receive a modest amount of external aid, it has no access to World Bank or IMF funds, or to bilateral budget support.

Poison pill

But some Somalilanders believe additional aid, if it is channelled through the state, may be a doubled-edged sword."It will kill the patient, it's a poison pill," said Hussein Bulhan of Somaliland's Institute for Development Solutions.

"It will aggravate problems, there will be more struggles within the ruling elite. To a large extent what pushed tyranny in Somalia, and finally brought the collapse of the Siad Barre regime, was internal struggle over who will have what."

Hussein Bulhan believes restrictions up to now on the level of external assistance have forced local solutions to problems.

"That is part of why we had to create and to think and to improvise. These experts that come tend to make people uncreative. In Somaliland, people had to do it on their own," he says.

"Help should be received from the outside world, but the initiative has been taken and that should not be destroyed."

The challenge now for Somaliland is not just attracting large inflows of external resources - but attracting them under the right terms.

Source: BBC